How to get rid of bad patterns in trading should be the quest of every trader that has gone past the state of searching for the holy grail.
Here’s a fact: I am aware of behavior patterns that make me lose money in trading and I just can’t understand why I repeat these patterns despite my awareness.
This is the fundamental dilemma that brings many people to professional psychologists.
So what really is the problem then?
Well, here’s the thing that is true:
- knowing problem patterns is necessary for change, BUT that alone is not sufficient.
I’ve known for a long time what behavior patterns are sabotaging my trading but THAT KNOWING hasn’t really changed anything at all.
Knowing something is just that…knowing. It sits inside my brain, parked away in the corner somewhere.
FOREX TRADING “F**kups IS LIKE A CASE OF ADDICTS
Here’s the thing about addicts: they are typically very aware of their problems. They know.
What waxes and wanes is their emotional connection to the consequences of these problems.
To a degree, we traders (profitable or not) are all addicts: we act or respond on habit.
Knowing our bad trading habits and sustaining the awareness to avoid and change them are very different challenges.
I am often frustrated by my inability to change my bad trading patterns and behaviors and the perverse tendency to repeat my costly mistakes.
These repetitive patterns are self-defeating but it does not mean that I have the urge to sabotage myself in trading.
So How Can We Get Rid Of These Bad Patterns In Trading?
Now, we are all different and each of you may go through a process of change that may be a bit different but the process or the structure of what must be followed is going to be universal and applicable to all areas of life that a change is desperately needed.
To change bad trading patterns and habits, a 3 step process has to be followed.
1: Pattern Recognition
The first step in changing bad trading habits is to recognize that you have a problem.
If you are a new forex trader, you’d most likely be still searching for the holy grail trading system or indicator and you’d most likely think that your forex trading success lies in them and you may not recognize the bad trading patterns and behaviors that you have.
Only later, you’ll come to your senses and realized that you’ve been barking up the wrong tree.
In some ways, recognizing bad trading habits is the most difficult of the stages.
It is very difficult to change a bad trading pattern if you don’t recognize it as it appears in real time situation in your trading.
The keyword here is real time.
You got to be able to see what is happening and cut it right there in real time before the thought process actually triggers the resultant action.
So how do you do that?
Keep a trading journal.
If you do, you will observe situations that trigger problem patterns and the correlates and consequences of those patterns.
By keeping detailed records in your journal, you may find that your pattern of impulsive, revenge trading after a loss is preceded by a high degree of muscle tension and verbal expressions of frustration.
This allows you to use the tension and venting of emotion as cues for recognizing that your old pattern is about to repeat.
Adding a log of your emotions and behaviors to your trading journal is extremely helpful in helping you see the patterns that set you up for success and failure.
Keeping a proper trading journal is one thing I’ve failed to do for a very long time. I sort of done it halfheartedly to some extent but I now realize, when you write your thoughts down and what you are feeling at that instant, you really “think” about what you are doing and this can make your trading better.
2: Pattern Interruption
Once we become familiar with the triggers and cues associated with problem trading patterns, we may not know what to do instead, but we can actively choose to not repeat the pattern.
If my pattern is one of taking high risk trades after a massive win, I can choose to walk away from the situation and gain a new perspective.
So how do you accomplish this pattern interruption?
Well, just think of a time when you did something you should not have done and lost $13,000 in a day?
Remember what happened? What did you do? What was the consequence of that action?
If you can vividly remind yourself of the consequences of those patterns, it will stop you repeating those trading habits/patterns.
For example, an alcoholic might rationalize that it’s ok to go to the bar with friends, but will intercept the “stinkin’ thinkin'” and remind himself that his last relapse began exactly that way.
Once you get in touch with the consequences of that bad trade and how you lost your forex trading account by 50%, a trader really starts taking control and puts brakes on automatic behavior patterns in trading.
What happens is that you will being to hate your old ways. To put it in christian perspective, it should be like “being born again”…the old has gone and the new has come.
Once you make the problem pattern an enemy and vividly remind yourself of all the ways it has cost you money and grief, it is much easier to interrupt its future appearance.
3: Pattern Substitution
After interrupting a pattern, it’s necessary to try something different.
You see, once you start removing something from your life, there’s a vacuum that needs to be filled.
The alcoholic of our above example might choose to visit a friend or talk and start being friends with people who don’t drink.
A frustrated losing trader who is tempted to put on larger trades to make her money back might instead take a break from the screen and engage in biofeedback exercises until she is calm and focused or play a video came or watch YouTube and learn to speak Japanese.
What’s the point? Fill that void with something else!
The goal is to take the triggers of the old coping pattern and turn them into triggers for new, more constructive coping.
Other ways include Imagery and mental rehearsal…these are excellent ways of building new patterns for substitution.
Before the trading situation starts, for example, the trader might purposely visualize, in great detail, a market scenario that has recently caused emotional havoc.
In her mind’s eye, she will watch himself feel tempted to make the same mistakes, but then visualize herself interrupting this urge and engaging in a better trading behavior.
By rehearsing the desired trading behavior before the market session and looking out for triggers during the session, the trader tilts the odds in her favor that she will be able to extricate herself from her old ways.
So what is the secret to making this work? What does it take?
That’s the key to making it work.
Repetition creates habits. Habits are repetitions. Habits are automatic.
You want to turn your desired behavior patterns into habit patterns. This means that you need to repeat good trading behaviors so many times…many many times, so that it just becomes a natural way for you to do it.
But there’s one big issue.
You must have the MOTIVATION to do that. Without motivation, you cannot, you will fail.
But eventually motivation wont be necessary anymore when those good trading patterns become your trading habits.
Mental rehearsal can accelerate this process, but ultimately we need to work the change process every day in real time circumstances.
OPPORTUNITY FOR CHANGE
Each trading day offers you the opportunity to:
- repeat the same old trading mistakes
- or make a change by doing these 3 steps listed above.
I’m intent on personal change and I know that I cannot make money every day I trade…that’s the nature of the forex market. But everyday will be a “win day” when you start making a change in the right direction instead of repeating those same old bad trading habits.
What do you chose?